Nikkei down slightly on caution ahead of earnings, economic uncertainty

Wed Apr 23, 2014 10:47pm EDT

By Hideyuki Sano
    TOKYO, April 24 (Reuters) - Japanese shares were down
slightly on Thursday morning, as investors were reluctant to bid
up prices ahead of the looming earnings season and lingering
worries over the economic impact of a sales tax hike that kicked
in this month.
    The Nikkei share average dropped 0.4 percent to
14,482.72, pulling further away from a two-week high of 14,650
hit on Monday. Over the past few days it has been stuck around
its 52-week moving average, now at 14,563.
    "On the whole, investors assume the Japanese economy will
recover after a slowdown due to the sales tax hike. But their
conviction is not strong, which is why they aren't buying 
Japanese shares even though their valuation is relatively
cheap," said Masayuki Doshida, senior market analyst at Rakuten
Securities.
    The sales tax hike to 8 percent from 5 percent on April 1 is
expected to dent consumption in the current quarter, but some
analysts worry that the impact on growth could be far greater
than policy makers anticipate.
    The market's immediate focus turned to a meeting of U.S.
President Barack Obama and Japanese Prime Minister Shinzo Abe,
who are expected to discuss a two-way trade pact seen as crucial
to a broader trans-Pacific agreement. 
    A trade deal could benefit Japan's major exporters such as
car makers in the medium-term. Abe has touted the broader trade
deal as vital for growth in the world's third-biggest economy,
but faces tough domestic opposition to opening up agricultural
market. 
    Mollifying Japan's powerful farmers' lobby and completing a
successful trade pact is seen as a key test on whether Abe can
deliver the third arrow, or structural reform, to go with two
others that's already been deployed -- fiscal and monetary
stimulus measures.
    The two leaders are due to hold a news conference at 0315
GMT.
    Most investors were keeping a quiet presence ahead of
earnings guidance from a large number of Japanese companies  for
their financial year to March 2015, expected from Thursday
onwards.
    Shin-estu Chemical and Hitachi Construction
 are among the companies that announce earnings on
Thursday, followed by Nikkei heavyweight Fanuc and
Denso on Friday.
    Large-cap shares led the decline, with an index of 30
large-cap shares falling 0.8 percent compared to the
overall market's fall of 0.5 percent.
    Both Toyota Motor and Denso fell 1.6
percent.
    NTT Docomo fell 1.7 percent and SoftBank dropped
1.3 percent after U.S. telecom sector shares
underperformed following earnings of AT&T.
    In contrast, some recently battered mid-cap shares got a bit
of respite. Aoki Holdings rose 2.2 percent to extend
its gains so far this week to 6.1 percent, outstripping the 0.8
percent gain in the Nikkei.
    The suppliers of Apple had a mixed session so far
despite sharp gains in the iPhone maker's shares after its
announcement of first quarter earning and share buybacks.
    TDK Corp was flat while Taiyo Yuden fell 0.9
percent.
    "The jump in Apple shares may have more to do with its
capital policy, rather than the strength in the earning," said a
fund manager at a Japanese asset management firm.
    The new JPX-Nikkei Index 400 dipped 0.5 percent
to 10,632.65.

 (Editing by Shri Navaratnam)
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